IIFL MULTICAP PMS (Portfolio Management Service) August 2019

Strategy Objective

The strategy objective is to generate long term capital appreciation for investors from a portfolio of equity & equity related securities. The portfolio manager aims to achieve achieve the investment objective by:- > Investing in a concentrated basket of 20-25 stocks with a bias towards large Cap stocks > Investing in stocks that are available at signi�icant discount to their intrinsic value > Investing in stocks that provide earnings visibility > Actively use sector rotation to align with changes in business cycles to generate Alpha > Portfolio Manager shall follow the SCDV framework for portfolio construction

Investment Philosophy - The SCDV Framework

Cyclical Growth (C) Secular Growth (S) Core Portfolio: S Capital Goods Cement Merck Auto & Auto Ancillaries Bajaj Finance Infrastructure Consumer Discretionary LogisticsPrivate Corp Banks HDFC Bank More than More InsurancePrivate Retail Banks Metals Non-Banking Financial Co. Muthoot Finance Retail Oil & Gas Downstream 15% PAT Growth PAT Tactical Allocation: C & D

Value Traps (V) Defensive Growth (D) ICICI Bank RBL Consumer Staples Infosys TelecomPSU Banks IT Services

Oil & Gas – Upstream MediaHealthcare Biocon Less than Less Utilities - Power Credit Access Grameen

Less than More than Avoid Allocation: V SBI^

15% Return on Equity

The mentioned securities in the SCDV framework are part of the current portfolio ^SBI is in Value Trap due to �inancial performance in the past but the recent data is positive and is expected to improve further The above statements / analysis should not be construed as an investment advice or a research report or a recommendation to buy or sell any security covered under the respective sector/s Cyclical (PAT>15%, ROE <15%) –Companies/ Sectors that show high growth but are affected by market cycles hence need to be timed for entry and exit Secular (PAT>15%, ROE >15%) – High growth companies / sectors which show consistent growth across market cycles Defensive (PAT<15%, ROE >15%) – Companies / sectors that show consistent stable growth across market cycles

Value Trap (PAT<15%, ROE <15%) – Companies/ sectors that are at attractive valuation but do not show commensurate growth.

Portfolio changes during the month Stock Action Rationale

Infosys Reduced We have partially replaced Infosys from the portfolio with Tata Consultancy Services Limited (TCS) as we see the discount

narrowing signi�icantly between Infosys and TCS considering Infosys was doing an open market buyback and for that reason had TCS New Addition outperformed TCS in recent months. Valuation wise and risk reward wise we see TCS as a better portfolio company from current levels over a medium to long term as compared to Infosys. We would look to replace the remaining Infosys also at a suitable level.

IPCA Labs Added IPCA labs is one of the better managed Pharma companies with quality management. Some of its plants continue to have US FDA approvals pending but, its non-US FDA affected plants have been seeing strong export growth. Valuation wise also looks reasonable based on FY20 and FY21 numbers

Greaves Cotton Added The company has been making strong progress on it Electric vehicle space with the increased stake in Ampere and launching newer models in the market at attractive price points. Apart from this new business segment, its traditional business Auto engines and pump-sets continues to do well and are seeing decent pickup in recent months

IIFL Asset Management Limited (Portfolio Manager)

Regd Off: 6th Floor, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai -400 013 Tel: (91-22) 4876 5600 • Fax: (91-22) 4646 4706 • Website: www.ii�lamc.com • CIN: U74900MH2010PLC201113 IIFL MULTICAP PMS (Portfolio Management Service) All data are as on August 30, 2019 and denominated in INR

Investment Theme & Strategy Performance (%)

Strategy/ Since 1 Month 2 Months 3 Months 6 Months YTD 1 Year 2 Years 3 Years term capital appreciation for investors from a Benchmark Inception The objective of the strategy is to generate long The investment strategy is to invest in portfolio of equity & equity related securities.

companies and in sectors that are available at IIFL Multicap PMS (0.97) (5.65) (5.83) 7.68 9.77 0.72 8.49 9.85 16.85 signi�icant discount to their intrinsic value and endeavoursprovide earnings to strategically visibility. The change portfolio allocation takes a concentrated position in stocks and

between sectors depending on changes in the S&P BSE 200 TRI (0.37) (6.02) (6.95) 1.92 0.06 (7.35) 4.45 8.33 8.00 business cycle. future. Returns less than 1 year are on absolute basis and more than one year are on compounded annualised basis. Past performance may or may not be sustained in Key Terms Sector - Top 6 Holdings Market Capitalization

inancials . Small Cap . Inception Date December 31, 2014 Information TeFchnology . 40 81% NA 14 33% Mid Cap Industrials 15 65% . . Bloomberg Ticker ealth Care 11. 65% 21 68%

Benchmark Index S&P BSE 200 TRI H Materials . 10 32% Large Cap Consumer iscretionary . 7 59% . Strategy Details D 4 59% 60 94% – Since Inception till 30th August, 2019 0% 10% 20% 30% 40% 50% SI returns Portfolio – Top 10 Holdings (%) Risk Ratios

- IIFL Multicap PMS 16.85% Company Weightage Beta SI returns - S&P BSE 200 TRI 8.00% 0.88 Outperformance/ HDFC BANK 7.41 (Underperformance) 8.85% Schedule of Charges BAJAJ FINANCE LIMITED 7.23 Sharpe Ratio 0.82 ICICI BANK LTD. 6.91 Information Ratio 14.01 Management PROCTER & GAMBLE HEALTH LIMITED 6.18 termsheet Treynor Measure As per executed AXIS BANK LIMITED 4.90 Fee 0.01 LARSEN TOUBRO LTD. 4.76 Volatility

termsheet WIPRO LTD. 4.49 14.55% Exit Load As per executed STATE BANK OF INDIA 4.25 All risk ratios are calculated since inception CROMPTON GREAVES CONSUMER Minimum ELECTRICAL LIMITED 3.66 *Information Ratio is a ratio of portfolio returns above the returns of a Investment benchmark index to the volatility of those returns. CREDITACCESS GRAMEEN LIMITED 3.49 the asset returns. Amount Rs. 25 lakhs **Volatility measures the risk of a security by using the standard deviation of CASH 3.04

Portfolio Manager Top Gainers Since Inception Performance Top Losers Since Inception Performance

IIFL Asset Management Limited (IIFL AMC) BAJAJ FINANCE LIMITED 215.61% TATA MOTORS LTD (73.82%) Strategy Manager Profile - Aniruddha Sarkar PROCTER & GAMBLE HEALTH LIMITED 198.29% QUESS CORP LIMITED (44.18%)

CREDITACCESS GRAMEEN LIMITED 102.95% EMAMI LIMITED (25.19%) Aniruddha Sarkar, Strategy Manager for IIFL NAV Movement Multicap PMS, has over a 13 years of II L Multicap PMS S P BS T I experience in the Financial Services sector.

involvedHe is associatedin identifying with investment IIFL Wealthideas F & E 200 R

Management Group for 11 years and has been 24

22 across various sectors and market-caps that 20 can generate alpha for the investors. He has 18 been one of the key members involved in

setting up the entire equity advisory desk at 16

IIFL Wealth. Prior to working with IIFL 14

Wealth, he was working with a UK based 12

hedge fund. He holds an MBA in Finance from 10 ec Aug Apr ec Aug Apr ec Aug IMI, New Delhi and a Bachelor’s degree in 8 Commerce from St. Xavier’s College, Calcutta. D -2014 -2015 -2016 D -2016 -2017 -2018 D -2018 -2019

NAV shown is for the model portfolio. NAV of 10 assumed on the inception date (31-Dec-2014) IIFL Asset Management Limited (Portfolio Manager)

Portfolio Holdings Valuation Matrix

P/E P/B ROE EPS CAGR S. No Company Weight (FY19-21) FY19A FY20e FY21e FY19A FY20e FY21e FY19A FY20e FY21e

1 HDFC BANK LTD 7.41% 26.96 23.51 19.48 4.22 3.72 3.23 16.5% 16.1% 17.0% 17.6%

2 BAJAJ FINANCE LIMITED 7.23% 46.91 35.40 27.51 9.26 7.55 6.17 22.5% 23.1% 23.0% 30.6%

3 ICICI BANK LTD.^ 6.91% 21.00 19.54 15.13 2.11 1.87 1.65 3.2% 12.4% 13.2% 30.0%

4 PROCTER & GAMBLE 6.18% 55.00 49.36 43.99 5.08 9.97 8.12 8.8% 13.6% 20.4% 32.3% HEALTH LIMITED 5 AXIS BANK LIMITED 4.90% 34.38 18.14 13.38 2.60 2.10 1.86 7.2% 13.6% 14.0% 60.3%

6 LARSEN TOUBRO LTD. 4.76% 21.84 19.64 16.75 3.42 3.02 2.65 13.7% 14.6% 14.8% 14.2%

7 WIPRO LTD. 4.49% 17.70 16.11 15.05 2.10 1.81 2.11 13.0% 12.3% 13.3% 8.4%

8 STATE BANK OF INDIA^ 4.25% 11.00 9.87 9.38 1.15 1.03 0.92 0.4% 11.7% 12.0% 30.0% CROMPTON GREAVES 9 CONSUMER ELECTRICAL 3.66% 35.93 27.90 22.30 6.70 4.50 3.80 36.6% 32.3% 29.7% 16.7% LIMITED

10 CREDITACCESS GRAMEEN 3.49% 22.45 9.19 7.99 2.64 2.25 1.92 23.2% 23.0% 22.6% 67.6% LIMITED

11 INFOSYS LIMITED 3.37% 22.39 20.78 18.57 5.33 5.93 5.68 25.0% 25.8% 29.4% 9.8%

12 MUTHOOT FINANCE LIMITED 3.32% 11.57 10.80 9.56 2.41 2.05 1.75 23.2% 23.0% 22.6% 10.0%

13 AAVAS FINANCIERS LIMITED 3.29% 57.00 47.99 35.41 6.26 5.53 4.77 11.5% 12.4% 14.7% 37.8%

14 PETRONET LNG LTD. 3.28% 15.90 13.39 11.51 3.62 3.24 2.94 22.4% 23.0% 23.1% 17.5%

15 TATA CONSULTANCY 3.24% 26.27 24.76 22.38 8.90 8.77 8.46 35.0% 35.7% 38.5% 8.4% SERVICESASIAN PAINTS LTD

16 3.19% 67.57 45.70 36.50 5.13 3.63 2.29 22.7% 23.8% 25.3% 20.4%

17 TECH MAHINDRA LIMITED 3.16% 13.13 13.15 11.78 2.62 2.44 2.28 21.2% 19.7% 20.8% 5.6%

18 QUESS CORP LIMITED 2.59% 24.91 17.60 13.48 2.26 2.07 1.85 9.8% 9.9% 12.1% 35.9%

19 IPCA LABS LTD 2.56% 27.14 21.50 17.43 3.87 3.27 2.73 15.6% 17.4% 18.8% 24.8%

20 SRF LIMITED 2.31% 24.20 19.44 15.58 3.42 3.01 2.58 15.5% 14.8% 16.8% 24.6%

21 SIEMENS LTD 2.23% 45.23 39.93 33.67 4.88 4.51 4.14 11.1% 12.0% 13.0% 15.9%

22 P I INDUSTRIES LTD 2.09% 36.98 29.21 23.61 6.26 5.25 4.41 18.5% 19.7% 19.7% 25.1%

23 GREAVES COTTON LTD 2.07% 14.68 13.03 10.89 2.86 2.71 2.48 19.5% 20.8% 22.7% 16.1%

24 CESC LTD 1.63% 8.33 8.04 7.40 1.09 0.97 0.86 13.3% 13.5% 13.2% 6.1%

25 CIPLA LTD. 1.59% 27.47 22.31 18.80 2.84 2.60 2.37 9.7% 10.7% 11.9% 20.9%

26 EMAMI LIMITED 1.43% 47.92 32.90 28.45 4.06 3.60 2.90 24.7% 25.4% 24.5% 29.8%

27 LARSEN TOUBRO 1.39% 17.26 17.08 14.88 5.30 4.40 3.70 34.6% 28.7% 26.8% 7.7% INFOTECH LIMITED 28 TATA MOTORS LTD 21.94 20.85 16.81 0.88 0.75 -48.6% 7.1% 8.4% 14.2% 0.93% 28.97 23.38 19.38 4.07 3.87 3.350.71 15.4% 17.7% 18.7% 23.9%

Source : IIFL AMC Research’; The estimates are subject to change depending on prevailing market conditions ^The EPS CAGR for the portfolio has been adjusted downwards after adjusting for the earnings of SBI and ICICI which have very low base in FY19. If we had taken their expected earnings growth on actual base over FY19-21, then the CAGR for the earnings growth of the portfolio comes to around 41%

IIFL Asset Management Limited (Portfolio Manager)

Commentary

There doesn’t seem to be any reprieve in negative news or sentiments in the Indian markets. Both local and global news along with market events kept investor sentiments on the edge during the month of August which had gone southbound post the budget announcement in the beginning of July’19. In all our earlier communications, we have been highlighting the state of the current economy and what the government needs to do to tackle the situation. We believe the good part is that the government has become aware of the weakness in the economy across sectors and is no longer defending the slowdown like it was being done earlier. FPI selling continued to put pressure on the markets though much of it was absorbed by the continuous buying from the DII during most of the last few months. Global equity markets also continued to witness enhanced volatility, with the undertone continuing to remain weak due to heightened trade war fears between US and China and weak macro-economic data from China and Euro zone. We don’t see any quick resolution in the US – China trade war which means continuous pressure on global growth. Central banks across the board are likely to continue governmentsto surprise markets and companies with the extentworldwide of interest are trading rate cuts. at negative While aggressive yields. rate cuts in emerging markets make a case for stronger dollar, US Fed too would eventually increase the pace of easing to keep dollar under check. The rising risk of recession is driving a bubble in global bond markets. About 30 per cent of the bonds issued by

The story in India is not much different. Last month was packed with release of few economic data and several announcements by �inance minister and RBI. GDP growth in 1Q came in at 5%, lower than expectations and following a weak print of 5.8% in the previous quarter. Consumption and Investment have witnessed a marked slowdown over the last six months. Last few weeks were packed with announcements and economic data release. The government and RBI responded with several announcements. The sequence started with RBI cutting interest rates by 35 bps followed by transferring additional Rs 580 bn to government coffers giving some relief to tight �iscal situation. RBI also made it mandatory for banks to link their lending rates to an external benchmark to accelerate the process of transmission of rates to end borrowers. PortfolioCurrent valuations performance seem to beduring pricing the in these month near-term concerns and offer a good risk-reward over a long-term horizon.

During the month of Aug’19, the IIFL Multicap PMS portfolio was down by -0.97% as compared to BSE 200 TRI Index falling by -0.37% and Nifty-50 falling by -0.85%. forIn 2019 the portfolio. YTD the portfolio has gained by 9.77% as compared to BSE-200 TRI being �lat at 0.06% and Nifty-50 rising by 1.48%. The PMS portfolio has been outperforming the benchmarks consistently over all time periods of more than 1 Month tabulated above and the Portfolio manager aims to generate favourable risk-adjusted returns

Disclaimer:

Securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Strategy will be achieved.

As with any securities investment, the value of a portfolio can go up or down depending on the factors and forces affecting the capital markets. Past performance of the Portfolio Manager may not be indicative of the performance in the future.

This document is for informational purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other investments mentioned in it. All opinions, �igures, charts/graphs, estimates and data included in this document are as on date and are subject to change without notice. The past performance of the Strategy is not indicative of its future performance. Client(s) are not being offered any guaranteed or indicative returns through these services. The returns mentioned anywhere in this document are not promised or guaranteed in any manner. While utmost care has been exercised while preparing this document, IIFL Asset Management Limited does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. While we endeavor to update on a reasonable basis the information discussed in this document, there may be regulatory, compliance, or other reasons that prevent us from doing so.

Returns are dependent on prevalent market factors, liquidity and credit conditions. Strategy returns depicted are in the current context and may be signi�icantly different in the future. The contents of this document should not be treated as advice relating to investment, legal or taxation matters. For tax consequences, each investor is advised to consult his / her own professional tax advisor. This communication is for private circulation only and for the exclusive and con�idential use of the intended recipient(s). Any other distribution, use or reproduction of this communication in its entirety or any part thereof is unauthorized and strictly prohibited. The investments may not be suited to all categories of investors. Recipient shall understand that the aforementioned statements cannot disclose all the risks and characteristics.

This document is not directed or intended for Distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdictions, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IIFL AMC to any registration or licencing requirement within such jurisdiction.

IIFL Asset Management Limited and its group and associate companies are engaged in providing various �inancial services and for the said services may earn fees or remuneration in form of arranger fees, referral fees, advisory fees, management fees, trustee fees, Commission, brokerage, transaction charges, underwriting charges, issue management fees and other fees. For the purpose of trading and investments in securities, the Portfolio Manager transacts through and maintain demat account(s) with IIFL Securities Limited (associate broker & depository participant) and IIFL Wealth Management Limited (Holding Company of IIFL AMC). IIFL Asset Management Limited (Portfolio Manager)